If you want to have more control over your retirement saving then setting up a self managed super fund (SMSF) might be the right solution for you. With the flexibility and amazing investment options it offers, an SMSF has become the preferred structure and more and more Australians are jumping on this bandwagon as to invest their retirement assets.
What makes this super fund stand out among other types of retirement funds is the double role that its members can have. Aside from being an active member of your SMSF, you will also have the role of a trustee. This gives you the opportunity to make crucial decisions regarding your investments and retirement planning. With such power over your retirement savings comes great responsibility, therefore before you set up your fund you should first take the time to learn more about the basic principles of SMSF. With the goal to help you get a better understanding about how an SMSF works, in this article we will outline the most important things you should know about setting up and running your own fund.
First, it’s important to know that the SMSF super fund should be set up with the only purpose to deliver financial benefits to members in retirement. The Australian Taxation Office (ATO) is responsible for regulating all SMSFs and each super fund must be set up to comply with the relevant laws and current legislation. One super fund can have between one to four members, who will also act as trustees. You can choose between two trustee structures: individual and corporate. In the individual trustee structure every member is appointed as a trustee of the fund. The corporate structure includes a company that serves as a trustee, while each member acts as a director. It might seem a bit more complex, but it actually makes it easier to keep track of assets and investments than an individual trustee structure.
One of the main things that make SMSF super popular is the range of tax benefits it provides. However, it’s important to mention that for your super fund to receive tax benefits it must be set up and run according the relevant ATO rules and laws. If your fund doesn’t comply with the rules, then instead of being taxed at the concessional rate of 15%, it will usually be taxed at a maximum marginal tax rate, which can considerably add up to the overall running costs. For your SMSF to comply with the governing rules and legislation it must be set up properly. To ensure you have a successful set up process consider hiring professionals like financial advisers and accountants. Your accountant can help you prepare the fund’s operating documents and accounts, while an experienced financial adviser can provide professional insight and advice when planning the investment strategy.